CFTC Issues Temporary No-Action Relief from Aggregation Requirements of Position Limits Rule

by Katten Muchin Rosenman LLP

[authors: Kevin M. Foley, Tanja Samardzija]

On July 24, the Commodity Futures Trading Commission issued temporary no-action relief to harmonize the implementation of the CFTC’s Position Limits for Futures and Swaps (the Position Limits Rule) with the proposed changes to the aggregation provisions of the Position Limits Rule.

The Position Limits Rule establishes a position limits regime for 28 exempt and agricultural commodity futures and options contracts and the physical commodity swaps that are economically equivalent to such contracts. The Position Limits Rule generally requires a person to aggregate its positions with the positions of any other entity in which the person has an ownership interest of 10 percent or more. In May 2012, the CFTC issued a notice of proposed rulemaking (Aggregation Notice) seeking public comment on proposed changes to the aggregation provisions.

Market participants must comply with the Position Limits Rule 60 days after the further definition of “swap” is published by the Federal Register, which is expected shortly. Because the CFTC may not have taken final action on the Aggregation Notice by that date, the no-action position provides that, upon the compliance date for the Position Limits Rule, market participants may comply with the aggregation requirements by either:

      1. complying with the Position Limits Rule as if it were amended to include the provisions   
           proposed in the Aggregation Notice; or

      2. compliance with the Position Limits Rule, except that the person does not aggregate any 
          positions in Referenced Contracts (as defined in the Position Limits Rule) held by another 
          entity that the Position Limits Rule would require be aggregated with the person’s positions,

                    i. the person believes, based on advice of counsel, that information sharing with that 
                       entity would result in a reasonable risk of violating federal, state, or foreign law, rule,
                       or regulation;

                    ii. the person has a 50% or lesser ownership or equity interest in that entity and has 
                        taken reasonable steps to ensure independence between the person and that   
                        owned entity, which may include but need not be limited to compliance with the
                        current standards for independence set forth in 17 C.F.R. Section 150.3(a)(4)(i) or 
                        in Section 151.7(f)(1); or

                   iii. the person acquires a 50% or lesser ownership or equity interest in that entity in the 
                        normal course of business as a broker-dealer registered with the Securities and 
                        Exchange Commission or similarly registered with a foreign regulatory authority.

The temporary relief will remain in effect until (i) 60 days after the CFTC publishes a rule finalizing changes to the CFTC’s aggregation policy, (ii) 60 days after the CFTC issues an order declining to take further action on the Aggregation Notice, or (iii) December 31, 2012, whichever occurs first.

Any entity that intends to rely on the temporary relief must provide prior notice to the Division of Market Oversight in an e-mail to: The notice to the Division of Market Oversight must: (i) state that the entity is relying on such relief, and (ii) state the names of any entities holding positions that it is not aggregating.

Click here for CFTC No-Action Letter. Click here for Aggregation Notice.


Written by:

Katten Muchin Rosenman LLP

Katten Muchin Rosenman LLP on:

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